The governor suggests bringing ag land valuations down to 65 percent and trying to get the income tax rate under 6 percent.

"How much more cash do we need in this state? $1.2 billion in cash is sitting in our checking and savings accounts," he said. "There are those in the legislature that won't support tax relief but oh governor, let's spend every dime of it tomorrow on their favorite social program."

Heineman said he won't spend a dime on Medicaid expansion.

"President Obama and his White House operatives are trying to pressure Nebraska into expanding Medicaid, but Nebraska will not be intimidated by the Obama administration," he said.

Heineman said expansion would mean cuts to education funding.

But, when asked about those left in coverage gap, the governor turned once again to taxes.

"Well, I think we have an obligation to take care of middle class families in the state. Their taxes are too high," he said.

The governor said a lot of money already goes to families in need through Health and Human Services.

But, Heineman said he will budget for prison reform.

He said violent offenders should earn reduced prison sentences, not just be given them.

"How many more people are they going to kill before we get tough on these guys? I don't want them on the streets of Nebraska," said the governor.

He urged lawmakers to reform the "good time" program, but asked senators to wait until after a study comes out this summer to tackle long-term capacity solutions.

"There may be a cost initially, may be more long term but you've also got to factor in all of the other parts that we're going to be talking about when it comes to long term strategy relative to our correctional system," said Heineman.

Other short term solutions include more security staff, contracting with county jails, increasing prisoners at the McCook Work Ethic Camp and reducing the number of federal detainees in Nebraska's prison system.

You can read Governor Heineman's entire State of the State Address here: